Rawlinson believes Scotland's shrinking banking sector and more than £2billion in proposed public spending cuts will hamper an industry-wide recovery until 2011.

Any price inflation is likely to be driven by a loss of capacity rather than an upsurge in activity in the short-term. Although there was an admission the worst of the recession may be over the study suggests construction output in Scotland fell by record amounts in the first quarter of the year.

Rawlinson said: "House builders are seeing some signs of market improvement, but things got so bad last year we'd be in desperate straits if there wasn't some sign of improvement.

"There are some signs of life in housing but these are unlikely to have any effect on the overall levels of activity until 2010 at the earliest. In the meantime, contractors in the commercial and public sectors is resulting in an even lower level of overall activity as forecast in the revised Construction Products report issued this week."

Private housing, industrial and commercial property are expected to show declines of 15 per cent, 25 per cent and 23 per cent respectively for 2009.

Total construction work across all sectors is expected to fall by as much as 16 per cent in 2009, dwarfing the 0.4 per cent overall drop reported in 2008. Scotland's top con-structiosite professionals have also seen their earnings drop by up to a third over the past year.

A recent report from the Chartered Institute of Purchasing and Supply said orders for private housing were up 11 per cent between April and June, though still down 37 per cent on figures published a year ago. House-builderPersimmonthisweekreportedsalevolumes consistently ahead of last year, with prices stabilising in many areas.

The housebuilder, which published its half-year results this week, said the number of cancellations was now at historically low levels, though it warned mortgage availability must improve and employment prospects stabilise before any real recovery can be seen in the sector.

In the six months to June 30, Persimmon generated revenues of £625m from 4,006 legally completed home, down from £998m in 2008. However, the company has reduced its debt to £495m at the end of June, down from £906m at the same point last year.